The WACC of Sherwin-Williams Co (SHW) is 8.0%.
Range | Selected | |
Cost of equity | 7.5% - 9.5% | 8.5% |
Tax rate | 20.7% - 21.8% | 21.25% |
Cost of debt | 4.0% - 4.8% | 4.4% |
WACC | 7.0% - 8.9% | 8.0% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.78 | 0.82 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.5% | 9.5% |
Tax rate | 20.7% | 21.8% |
Debt/Equity ratio | 0.11 | 0.11 |
Cost of debt | 4.0% | 4.8% |
After-tax WACC | 7.0% | 8.9% |
Selected WACC | 8.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
SHW | Sherwin-Williams Co | 0.11 | 0.69 | 0.63 |
ALB | Albemarle Corp | 0.44 | 1.65 | 1.22 |
ASH | Ashland Global Holdings Inc. | 0.55 | 1.01 | 0.71 |
AXTA | Axalta Coating Systems Ltd | 0.51 | 0.91 | 0.65 |
CE | Celanese Corp | 1.89 | 1.07 | 0.43 |
DD | Dupont De Nemours Inc | 0.23 | 1.22 | 1.04 |
FUL | HB Fuller Co | 0.6 | 0.89 | 0.61 |
IFF | International Flavors & Fragrances Inc | 0.46 | 0.59 | 0.43 |
PPG | PPG Industries Inc | 0.22 | 0.86 | 0.73 |
RPM | RPM International Inc | 0.15 | 0.64 | 0.58 |
Low | High | |
Unlevered beta | 0.62 | 0.67 |
Relevered beta | 0.67 | 0.73 |
Adjusted relevered beta | 0.78 | 0.82 |
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for SHW:
cost_of_equity (8.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.78) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.